QUAPAW TRIBE OF OKLAHOMA

Transcription

1 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2016

2 Quapaw Tribe of Oklahoma Annual Financial Report For The Year Ended September 30, 2016 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditors' Report... 1 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position... 4 Statement of Activities... 5 Fund Financial Statements: Balance Sheet - Governmental Funds... 7 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position... 9 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities..., 12 Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - Fiduciary Funds Combining Statement of Net Position - Component Units Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Component Units Notes to the Financial Statements A-1 A-2 A-3 A-4 A-5 A-6 A-7 A-8 A-9 A-10 A-11 C-5 C-6 Combining Statements as Supplementary loformatjon: General Fund: Combining Balance Sheet C-1 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-2 Special Revenue Funds: Combining Balance Sheet - Nonmajor Special Revenue Funds... Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds C-4 Enterprise Funds: Combining Statement of Net Position - Non major Enterprise Funds C-5 Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Nonmajor Enterprise Funds C-6 Combining Statement of Cash Flows - Nonmajor Enterprise Funds C-7 40 C-3

3 Quapaw Tribe of Oklahoma Annual Financial Report For The Year Ended September 30, 2016 TABLE OF CONTENTS OTHER SUPPLEMENTARY INFORMATION SECTION Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance for Each Major Program and on Internal Control over Compliance Required by Title 2 CFR Part 200 (Uniform Guidance) Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Corrective Action Plan Schedule of Expenditures of Federal Awards D-1 Notes to the Schedule of Expenditures of Federal Awards... 69

4 Financial Section

5 ANDERSON, MARx&BOHL, P.C. CERTIFIED PUBLIC ACCOUNTANTS HUDSON ANDERSON, CPA FRANK MARX, III, CPA DORI BOHL, CPA & CFE Independent Aydjtors' Report To the Business Committee Quapaw Tribe of Oklahoma PO Box 765 Quapaw, Oklahoma Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Quapaw Tribe of Oklahoma ("the Tribe") as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise the Tribe's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Tribe's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Tribe's internal control. Accordingly, we express n.o such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 119 NORTH MAIN, CORSICANA, TEXAS PHONE: (903) FAX: (903)

6 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Quapaw Tribe of Oklahoma as of September 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Change in Accounting Principle As described in Note A to the financial statements, in 2016, Quapaw Tribe of Oklahoma adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 72, Fair Value. Our opinion is not modified with respect to this matter. As described in Note A to the financial statements, in 2016, Quapaw Tribe of Oklahoma adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Our opinion is not modified with respect to this matter. As described in Note A to the financial statements, in 2016, Quapaw Tribe of Oklahoma adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 76, Hierarchy of GAAP. Our opinion is not modified with respect to this matter. As described in Note A to the financial statements, in 2016, Quapaw Tribe of Oklahoma adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 79, Investment Pools. Our opinion is not modified with respect to this matter. other Matters Required Supplementary Information Management has omitted Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Quapaw Tribe of Oklahoma's basic financial statements. The combining financial statements are presented for purposes of additional analysis and are not required parts of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F -- Audit Requirements (Uniform Guidance) and is also not a required part of the basic financial statements. ANDERSON, MARx & BOHL, P.C. CERTIFIED PUBLIC ACCOUNTANTS 2

7 The combining financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated April 25, 2017 on our consideration of Quapaw Tribe of Oklahoma's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Quapaw Tribe of Oklahoma's internal control over financial reporting and compliance. Respectfully submitted, Anderson, Marx & Bohl, P.C. Corsicana, Texas April 25, 2017 ANDERSON, MARx & BOHL, P.C. CERTIFIED PUBLIC ACCOUNTANTS 3

8 Basic Financial Statements

9 STATEMENT OF NET POSITION SEPTEMBER 30, 2016 EXHIBIT A-1 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances for uncollectib/es) Internal Balances Other Receivables Inventories Prepaid Expenses Noncurrent Assets: Other Assets Capital Assets (net of accumulated depreciation): Land Historical Collections Construction in Progress Buildings and Improvements Leasehold Improvements Equipment Site Development Vehicles Accumulated Depreciation Total Assets LIABILITIES Accounts Payable and Other Current Liabilities Accrued Interest Payable Compensated Absences Notes Payable Due in more than one year-notes Payable Total Liabilities NET POSITION: Net Investment in Capital Assets Restricted For: Federal and State Programs Unrestricted Total Net Position Governmental Activities 3,262,054 1,500,000 1,634,807 9,500 5,250 81,579 20,812,021 60,000 36,396 18,301,135 1,804,374 2,404,005 (5,473,390) 44,437,731 2,256, , ,112 4,632,500 8,187,199 32,660,929 1,501,024 2,088,579 36,250,532 Primary Government Business-type Component Activities Total Units 1,510,130 4,772,184 41,168,670 1,500, ,207 2,506,014 1,946,669 (9,500) 5, , ,579 1,374,459 33, ,646 1,236,765 1,790,396 2,757,947 23,569, ,609 60,000 36,396 1,524, ,609 18,718, ,419,127 15,101,334 1,982,960 3,787,334 67,723, , ,107 2,844, ,129 (1,265,931) (6,739,321) (113,605,367) 6,950,175 51,387, ,368, ,937 3,061,018 11,915,704 7,665, , , ,968 3,000,000 85,600 4,718, ,443,592 1,078,393 9,265, ,024,457 4,059,236 36,720,165 (104,256,851) 1,501,024 1,812,546 3,901,125 35,601,255 5,871,782 42,122,314 (68,655,596) The accompanying notes are an integral part of this statement. 4

10 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 Functions/Programs PRIMARY GOVERNMENT: Governmental Activities: General Government Public Safety Highways and Streets Health and Welfare Culture and Recreation Conservation Urban Redevelopment and Housing Economic Development and Assistance Total Governmental Activities Program Revenues Operating Charges for Grants and Expenses Services Contributions 25,274,157 2,845,175 1,125, , , , ,481 1,411,561 4,764 1,495, ,221 2,250 49,260 8,793,443 8,866, , , ,764,032 2,852,189 13,117,542 Capital Grants and Contributions 205,196 55, ,218 Business-type Activities: Quapaw Cattle Company Eagle Creek Golf Course Quapaw Counseling Services Quapaw Services Authority Total Business-type Activities Total Primary Government COMPONENT UNITS: Downstream Development Authority Quapaw Casino Total Component Units 2,001, , ,803 1,347,233 1,705,990 6,054,710 11,440,250 9,536,119 13,987, ,407, ,865,321 16,003,139 17,913, ,410, ,779,296 General Revenues: Taxes Gaming Revenues Licenses and Permits Other Revenues Not Specific to Programs Program Revenues Rent and Royalties Unrestricted Investment Earnings Indirect Proprietary Funds Investment Earnings Gain (Loss) on Disposal of Capital Assets Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning Prior Period Adjustment Net Position - Ending 46,500 46, The accompanying notes are an integral part of this statement. 5

11 EXHIBIT A-2 Net (Expense) Revenue and Changes in Net Position Governmental Business-type Component Activities Activities Total Units (21,303,473) (21,303,473) 493, , , ,628 89,027 89,027 (113,711) (113,711) 129, ,432 17,965 17,965 (20,533,083) (20,533,083) (1,113,358) (1,113,358) (132,803) (132,803) 358, ,757 5,385,540 5,385,540 4,498,136 4,498,136 (20,533,083) 4,498,136 (16,034,947) 13,458,187 1,910,836 15,369,023 1,707,472 1,707,472 3,163,957 3,163, , ,893 1,983,397 1,983, , ,110 12,080 12, ,000 (275,000) 99,909 (360,439) (360,439) 2,141 14,364,765 (2,327,352) 12,037,413 (12,037,413) 22,095,307 (2,602,352) 19,492,955 (11,935,363) 1,562,224 1,895,784 3,458,008 3,433,660 34,688,308 3,975,998 38,664,306 (71,999,186) (90,070) 36,250,532 5,871,782 42,122,314 (68,655,596) 6

12 BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2016 ASSETS General Fund Environmental Protection Agcy Superfund Assets: Cash and Cash Equivalents 2,244,664 Investments 1,500,000 Receivables (net of allowances for uncol/ectibles) 552, ,714 Due from Other Funds 79,378 Prepaid items 66,732 Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable 1,189,699 Accrued Liabilities 87, ,281 Other Liabilities 4,450 Grants Payable Due to Other Funds 701 Total Liabilities 1,282, ,714 Fund Balances: Restricted for Federal and State Programs Unassigned 3,160,662 Total Fund Balances 3,160,662 Total Liabilities and Fund Balance 4,442, , The accompanying notes are an integral part of this statement. 7

13 Department of Interior Roads Construction 909, ,137 1, , , ,393 Other Governmental Funds 107, ,297 8,826 14, ,337 49, , , , , ,967 8 EXHIBIT A-3 Total Governmental Funds 3,262,054 1,500,000 1,640,057 88,204 81, ,114, ,866 4, ,704 2,334,785 1,076,447 3,160,662 4,237,109 6,571,894

14 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2016 EXHIBIT A-4 Total fund balances - governmental funds balance sheet Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not reported in the funds. Payables for notes which are not due in the current period are not reported in the funds. Payables for compensated absences which are not due in the current period are not reported in the funds. Net position of governmental activities - Statement of Net Position 4,237,109 37,944,541 (5,283,612) (647,506) 36,250,532 The accompanying notes are an integral part of this statement. 9

15 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Environmental Protection Agcy General Fund Superfund Revenue: Taxes 1,707,472 License and Permits 802,893 Pow-Wow Revenue 103,856 Tribal Match Revenue Program Revenues 2,360,570 Charges tor Services 484,629 Grants Revenue 24,500 8,403,245 Investment Earnings 11,596 Rents and Royalties 146,110 Other Revenue 1,876,61 9 Revenues from Gaming Operations 3,163,957 Total revenues 10,682,202 8,403,245 Expenditures: Current: Personal Services-Payroll and Taxes 5,775, ,921 Personal Services-Employee Benefits 2,381,121 41,503 Software & Fees 2,200 Education 19,286 Utility Services 244,352 Incentives & Fees 139,406 Repair & Maintenance Services 238,71 1 1,199 Rentals 8,170 Other Purchased Services 201,378 7,987,191 Communications 201,206 5,015 Advertising 40,272 Program Expense 112,222 Travel & Training 306,442 7,354 Supplies 176,770 10,753 Other Expenses 299, Special Needs Expenses 366,250 Food 71,924 Cultural Preservation 32,704 Housing Assistance 1,273,312 Law Enforcement 29,030 Insurance, Other Than Employee Benefits 130,784 Professional 3,437,248 Indirect 27,994 Client Assistance 252,538 Employee/Tribal Member Claims/Admin 6,578,570 Capital Outlay: Land 572,203 Buildings & Improvements 697,950 Equipment 177, Debt Service: Principal 1,462,176 Interest 251,590 T otat Expenditures 25,509,061 8,213,523 Excess (Deficiency) of Revenues Over (Under) Expenditures (14,826,859) 189,722 Other Financing Sources (Uses): Operating Transfers 14,533,238 Indirect (254,648) (189,722) Total Other Financing Sources (Uses) 14,278,590 (189,722) Net Change in Fund Balances (548,269) Fund Balances - Beginning 3,708,931 Fund Balances - Ending 3,160,662 The accompanying notes are an integral part of this statement. 10

16 EXHIBIT A-5 Department of Interior Other Total Roads Governmental Governmental Construction Funds Funds 1,707, , ,856 9,912 9, ,360, , ,481 4,350,533 13,378, , ,1 10 1,876,619 3,163, ,880 4,360,602 24,046,929 28,777 1,555,181 7,519,631 9, ,780 2,989,676 50,577 52, , ,352 25, , , ,622 7,015 15, , ,685 8,826,037 1,170 95, ,421 40,272 1,238,743 1,350, , , , ,122 69, , ,250 72,001 32,704 5,378 1,278,690 29,030 36, ,536 3,437,248 27, ,538 6,578, ,203 1, , , ,797 1,462, , ,819 4,893,010 39,052, ,061 (532,408) (15,005,484) (168,473) 14,364,765 (8,500) 727, ,000 (8,500) 559,397 14,639, ,561 26,989 (365,719) 752, ,202 4,602,

17 RECONCIL/A T/ON OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2016 EXHIBIT A-6 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the Statement of Activities ("SOA") are different because: Capital outlays are not reported as expenses in the SOA. The depreciation of capital assets used in governmental activities is not reported in the funds. Trade-in or disposal of capital assets decrease net position in the SOA but not in the funds. Repayment of loan principal is an expenditure in the funds but is not an expense in the SOA. Compensated absences are reported as the amount earned in the SOA but as the amount paid in the funds. (365,719) 1,722,860 (854,271) (360,439) 1,462,176 (42,383) Change in net position of governmental activities - Statement of Activities.===' 1, '= 56 = 2 e,;,2,;; 24 The accompanying notes are an integral part of this statement. 12

18 STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2016 EXHIBIT A-7 Enterprise Enterprise Fund Fund Eagle Quapaw Nonmajor Total Creek Services Enterprise Enterprise Golf Course Authority Funds Funds ASSETS: Current Assets: Cash and Cash Equivalents 972, , ,932 1,51 0,130 Receivables (net of allowances for uncol/ectibles) 22, ,101 31, ,207 Inventories 103, , ,579 Prepaid Expenses 24,899 8,168 33,067 Total Current Assets 1,099,207 1,064, ,309 2,626,983 Noncurrent Assets: Capital Assets: Land 2,757,947 2,757,947 Buildings and Improvements 417, ,609 Equipment 770,514 1,064, ,845 1,982,960 Vehicles 365,257 74, ,107 Less Accumulated Depreciation (759,772) (481,199) (24,960) (1,265,931) Total Noncurrent Assets 3,186, , ,735 4,332,692 Total Assets 4,285,505 2,013, ,044 6,959,675 LIABILITIES: Current Liabilities: Accounts payable and other accrued liabilities 273, , , ,937 Due to other funds 9,500 9,500 Notes payable - current 4, , ,856 Noncurrent Liabilities: Notes Payable 85,600 85,600 Total Noncurrent Liabilities 85,600 85,600 Total Liabilities 277, , ,860 1,087,893 NET POSITION: Net Investment in Capital Assets 3,182, , ,735 4,059,236 Unrestricted Net Position 826, , ,449 1,812,546 Total Net Position 4,008,246 1,449, ,871,782 The accompanying notes are an integral part of this statement. 13

19 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 EXHIBIT A B Enterprise Enterprise Fund Fund Eagle Quapaw Nonmajor Total Creek Services Enterprise Enterprise Golf Course Authority Funds Funds OPERATING REVENUES: Charges for Services 11,440,250 2,547,505 13,987,755 Total Operating Revenues 11,440,250 2,547,505 13,987,755 OPERATING EXPENSES: Personal Services Payroll and Taxes 1,242, ,256 1,885,621 Commissions 5,333 5,333 Personal Services Employee Benefits 382, , ,277 Purchased Professional and Technical Services 2,552, ,818 2,694,649 Interest 3,352 3,352 Rentals 29,362 29,362 Utility Services 12,883 10,292 23,175 Repairs and Maintenance Office Supplies 16,478 7,736 24,214 Insurance 51,641 31,025 82,666 Communications 2,275 19,301 21,576 Travel 3,770 57,585 61,355 Supplies 17,957 17,957 Cattle Expense 1,477,537 1,477,537 Other Expenses 1,505, ,958 1,715,979 Family Preservation Expenses 396, ,754 Health Services 22,944 22,944 Small Equipment Expense 12,721 91, ,948 Depreciation 129, ,123 24, ,534 Total Operating Expenses 132,803 6,054,710 3,348,606 9,536,119 Operating Income (132,803) 5,385,540 (801,101) 4,451,636 NON-OPERATING REVENUES (EXPENSES): ITBC Herd Development 46,500 46,500 Indirect (1 75,000) (100,000) (275,000) Total Non-operating Revenues (Expenses) (175,000) (53,500) (228,500) Income before Transfers (132,803) 5,210,540 (854,601) 4,223,136 lnterfund Operating Transfers 397,648 (3,742,050) 1,017,050 (2,327,352) Change in Net Position 264,845 1,468, ,449 1,895,784 Total Net Position Beginning 3,743,401 (19,138) 251,735 3,975,998 Total Net Position Ending 4,008,246 1,449, ,184 5,871,782 The accompanying notes are an integral part of this statement. 14

20 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 EXHIBIT A-9 Cash Flows from Operating Activities: Cash Received from Customers Cash Payments to Employees for Services Cash Payments to Other Suppliers for Goods and Services Other Operating Cash Receipts (Payments) Net Cash Provided (Used) by Operating Activities Cash Flows from Non-capital Financing Activities: Payment of Indirect Costs to Other Funds Transfers From (To) Other Funds Net Cash Provided (Used) by Non-capital Financing Activities Cash Flows from Capital and Related Financing Activities: Debt Payments Acquisition or Construction of Capital Assets Net Cash Provided (Used) for Capital & Related Financing Activit Enterprise Funds Eagle Quapaw Nonmajor Creek Services Enterprise Golf Course Authority Funds Totals 11,090,645 2,595,984 13,686,629 (1,624,634) (808,264) (2,432,898) (4,812,404) (2,564,765) (7,377,169) (72,022) (72,022) (72,022) 4,653,607 (777,045) 3,804,540 (175,000) (100,000) (275,000) 397,648 (3,750,000) 1,025,000 (2,327,352) 397,648 (3,925,000) 925,000 (2,602,352) (84,561) (400,400) (484,961) (328,623) (109,361) (222,695) (660,679) (413,184) (509,761) (222,695) (1,145,640) Cash Flows from Investing Activities: Interest and Dividends on Investments Net Cash Provided (Used) for Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year (87,558) 218,846 (74,740) 56,548 1,060, '--', ,672 1,453, ====3=1 == '== Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income (Loss) (132,803) 5,385,540 (754,601) 4,498,136 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation 129, ,123 24, ,534 Change in Assets and Liabilities: Decrease (Increase) in Receivables (13,456) (349,605) 1,979 (361,082) Decrease (Increase) in Inventories (43,145) 216 (42,929) Decrease (Increase) in Prepaid Expenses (549) (4,914) Increase (Decrease) in Accounts Pay/Accrued Liab (12,069) (645,086) (58,550) (715,705) Increase (Decrease) in lnterfund Payables 9,500 9,500 Total Adjustments 60,781 (731,933) (22,444) (693,596) Net Cash Provided (Used) by Operating Activities (72,022).==-== 4,653,607 (777,045) The accompanying notes are an integral part of this statement. (4,365) 15

21 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS SEPTEMBER 30, 2016 ASSETS: Cash and Cash Equivalents Investments Other Receivables Total Assets LIABILITIES: NET POSITION Net Position Held in Trust for Others Private-purpose Trust Fund Barbara Shapp Schmidt Trust 8,949 61,327 39, ,301 == =10=9"=3=1 EXHIBIT A-10 The accompanying notes are an integral part of this statement. 16

22 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 EXHIBIT A-1 1 Private-purpose Trust Fund Additions: Investment Income Net (Decrease) in Fair Value of Investments Contributions Total Additions Barbara Shapp Schmidt Trust 1,593 1,593 Deductions: Scholarship Awards Benefits Administrative Expenses Total Deductions Change in Net Position Net Position-Beginning of the Year Net Position-End of the Year 1, ,708 == = 01 = The accompanying notes are an integral part of this statement. 17

23 COMBINING STATEMENT OF NET POSITION COMPONENT UNITS SEPTEMBER 30, 2016 EXHIBIT A-12 ASSETS: Current Assets: Cash and Cash Equivalents Receivables (net of allowances for uncof/ectibles) Inventories Prepaid Expenses Total Current Assets Downstream Development Authority 38,145,381 1,908,826 1,246,102 1,1 29,460 42,429,769 Quapaw Casino 3,023,289 37, , ,305 3,296,794 Total Component Units 41,168,670 1,946,669 1,374,459 1,236,765 45,726,563 Noncurrent Assets: Other Assets Capital Assets: Land Buildings and Improvements Leasehold Improvements Equipment Vehicles Construction in Progress Site Development Less Accumulated Depreciation Total Noncurrent Assets Total Assets 1,790, , ,902,699 15,101,334 65,356, ,760 1,524,656 (109,450,120) 213,203, ,633, ,890 3,516,428 2,367, , ,957 (4,155,247) 2,438,739 5,735,533 1,790, , ,419,127 15,101,334 67,723, ,129 1,524, ,957 (113,605,367) 215,642, ,368,861 LIABILITIES: Current Liabilities: Accounts payable and other accrued liabilities Accrued interest payable Notes payable - current 10,824,192 7,665,161 3,000,000 1,091,512 11,915,704 7,665,161 3,000,000 Noncurrent Liabilities: Notes Payable Total Noncurrent Liabilities Total Liabilities 307,443, ,443, ,932,945 1,091, ,443, ,443, ,024,457 NET POSITION: Net Investment in Capital Assets Unrestricted Net Position Total Net Position (106,695,590) 33,395,973 (73,299,617) 2,438,739 2,205, (104,256,851) 35,601,255 (68,655,596) The accompanying notes are an integral part of this statement. 18

24 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2016 EXHIBIT A-13 Downstream Development Authority OPERATING REVENUES: Charges for Sales and Services: Charges for Services 166,865,321 Total Operating Revenues 166,865,321 OPERATING EXPENSES: Personal Services - Payroll and Taxes Interest 32,257,898 Repairs and Maintenance 10,801,107 Cost of Goods for Resale 63,087,477 Other Expenses 34,934,425 Depreciation 12,326,227 Total Operating Expenses 153,407,134 Operating Income 13,458,187 NON-OPERATING REVENUES (EXPENSES): Investment Earnings 98,530 Gain (Loss) on Sale of capital assets 3,891 Total Non-operating Revenues (Expenses) 102,421 Income before Transfers 13,560,608 lnterfund Operating Transfers (10,397,648) Change in Net Position 3,162,960 Total Net Position - Beginning (76,462,577) Prior Period Adjustment Total Net Position - Ending (73,299,617) Quapaw Casino Total Component Units 17,913, ,779,296 17,913, ,779,296 4,023,700 4,023,700 32,257,898 10,801,107 9,208,332 72,295,809 2,399,247 37,333, ,860 12,698,087 16,003, ,410,273 1,910,836 15,369,023 1,379 99,909 (1,750) 2,141 (371) 102,050 1,910,465 15,471,073 (1,639,765) (12,037,413) 270,700 3,433,660 4,463,391 (71,999,186) (90,070) (90,070) (68,655,596) The accompanying notes are an integral part of this statement. 19

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 A. Summary of Significant Account i ng Policies The combined financial statements of Quapaw Tribe of Oklahoma (the "Tribe") have been prepared in conformity with accounting principles applicable to governmental units which are generally accepted in the United States of America. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. 1. Reporting Entity The Tribe's basic financial statements include the accounts of all its operations. The Tribe evaluated whether any other entity should be included in these financial statements. The criteria for including organizations as component units within the Tribe's reporting entity "The Financial Reporting Entity," include whether: - the organization is legally separate (can sue and be sued in its name) - the Tribe holds the corporate powers of the organization - the Tribe appoints a voting majority of the organization's board - the Tribe is able to impose its will on the organization - the organization has the potential to impose a financial benefivburden on the Tribe - there is fiscal dependency by the organization on the Tribe - the exclusion of the organization would result in misleading or incomplete financial statements The Tribe also evaluated each legally separate, tax-exempt organization whose resources are used principally to provide support to the Tribe to determine if its omission from the reporting entity would result in financial statements which are misleading or incomplete. Inclusion of such an organization as a component unit is required when: 1) The economic resources received or held by the organization are entirely or almost entirely for the direct benefit of the Tribe, its component units or its constituents; and 2) The Tribe or its component units is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the organization; and 3) Such economic resources are significant to the Tribe. Based on these criteria, the Tribe has two discretely presented component units, Downstream Development Authority and Quapaw Casino. The Tribe is not a component unit of any other reporting entity as defined by the GASB Statement. Separate financial statements of the component units are available at the Tribe. 2. Basis of Presentation, Basis of Accounting a. Basis of Presentation Government-wide Statements: The statement of net position and the statement of activities include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. These statements distinguish between the governmental and business-type activities of the Tribe. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the Tribe and for each function of the Tribe's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The Tribe does not allocate indirect expenses in the statement of activities. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 20

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Fund Financial Statements: The fund financial statements provide information about the Tribe's funds, with separate statements presented for each fund category. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. The Tribe reports the following major governmental funds: General Fund. This is the Tribe's primary operating fund. It accounts for all financial resources of the Tribe except those required to be accounted for in another fund. Superfund. This fund is involved heavily in removal, cleanup and rebuild of environmental danger. Roads Construction. This fund is utilized for road and bridge repair within the Tribe's jurisdiction. The Tribe reports the following major enterprise funds: Eagle Creek Golf Course. This fund accounts for the assets held for operation of the golf course. Quapaw Services Authority. remediation services. This fund accounts for the operation of construction and environmental In addition, the Tribe reports the following fund types: Private-Purpose Trust Funds: These funds are used to report trust arrangements under which principal and income benefit individuals, private organizations, or other governments not reported in other fiduciary fund types. Fiduciary funds are reported in the fiduciary fund financial statements. However, because their assets are held in a trustee or agent capacity and are therefore not available to support Tribe programs, these funds are not included in the government-wide statements. b. Measurement Focus, Basis of Accounting Government-wide, Proprietary, and Fiduciary Fund Financial Statements: These financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the Tribe gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Tribe considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible-to-accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and 21

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. When the Tribe incurs an expenditure or expense for which both restricted and unrestricted resources may be used, it is the Tribe's policy to use restricted resources first, then unrestricted resources. 3. Financial Statement Amounts a. Cash and Cash Equivalents For purposes of the statement of cash flows, highly liquid investments are considered to be cash equivalents if they have a maturity of three months or less when purchased. b. Inventories and Prepaid Items Inventories on the balance sheet are stated at cost. Inventory items are recorded as expenditures when they are consumed. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. c. Capital Assets Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated fixed assets are recorded at their estimated fair value at the date of the donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. A capitalization threshold of 5,000 is used. Capital assets are being depreciated using the straight-line method over the following estimated useful lives: Asset Class Infrastructure Buildings Building Improvements Vehicles Office Equipment Computer Equipment Estimated Useful Lives For Component Unit Downstream Development Authority, estimated useful lives are as follows: Asset Class Buildings and Improvements Leasehold Improvements Furniture, Fixtures and Equip. Vehicles Estimated Useful Lives

28 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 For Component Unit Quapaw Casino, estimated useful lives are as follows: Asset Class Site Development Buildings and Improvements Equipment Furniture and Fixtures Vehicles Estimated Useful Lives d. Receivable and Payable Balances The Tribe believes that sufficient detail of receivable and payable balances is provided in the financial statements to avoid the obscuring of significant components by aggregation. Therefore, no disclosure is provided which disaggregates those balances. As of September 30, 2016, immaterial allowances for doubtful accounts have been utilized as determined necessary to adjust for amounts deemed uncollectible. e. lnterfund Activity lnterfund activity results from loans, services provided, reimbursements or transfers between funds. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers In and Transfers Out are netted and presented as a single "Transfers" line on the government-wide statement of activities. Similarly, interfund receivables and payables are netted and presented as a single "Internal Balances" line of the government-wide statement of net position. f. Fund Balances - Governmental Funds Fund balances of the governmental funds are classified as follows: Nonspendable Fund Balance - represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid insurance) or legally required to remain intact (such as notes receivable or principal of a permanent fund). Restricted Fund Balance - represents amounts that are constrained by external parties, constitutional provisions or enabling legislation. Committed Fund Balance - represents amounts that can only be used for a specific purpose because of a formal action by the Tribe's Business Committee. Committed amounts cannot be used for any other purpose unless the Business Committee removes those constraints by taking the same type of formal action. Committed fund balance amounts may be used for other purposes with appropriate due process by the Business Committee. Commitments are typically done through adoption and amendment of the budget. Committed fund balance amounts differ from restricted balances in that the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation. Assigned Fund Balance - represents amounts which the Tribe intends to use for a specific purpose, but that do not meet the criteria to be classified as restricted or committed. Intent may be stipulated by the Business Committee or by an official or body to which the Business Committee delegates the authority. Specific amounts that are not restricted or committed in a special revenue, capital projects, debt service or permanent fund are assigned for purposes in accordance with the nature of their fund type or the fund's primary purpose. Assignments within the general fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purposes of the Tribe itself. 23

29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Unassigned Fund Balance - represents amounts which are unconstrained in that they may be spent for any purpose. Only the general fund reports a positive unassigned fund balance. Other governmental funds might report a negative balance in this classification because of overspending for specific purposes for which amounts had been restricted, committed or assigned. When an expenditure is incurred for a purpose for which both restricted and unrestricted fund balance is available, the Tribe considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the Tribe considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. g. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues, and expenditures, expenses, and other disclosures. Accordingly, actual results could differ from those estimates. h. Component Unit Debt Issuance Costs, Net These costs consist of costs incurred in the issuance of long-term debt. Amortization of debt issuance costs is computed using the interest method over the stated maturity of the long-term debt. Accumulated amortization of debt issuance cost reported in the component unit audit report is 5,687,227 at September 30, The component unit recorded amortization of interest expense of 1,027,624 for the current year, and recorded a net gain on extinguishment of debt of 322,054. For purposes of the Tribe's audit, these amounts have been written off in accordance with Governmental Accounting Standards Board Statement No. 65. i. Deferred Outflows and Inflows of Resources In addition to assets, the statements of financial position (the government-wide Statement of Net Position) and governmental funds balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position and/or fund balance that applies to one or more future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statements of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to one or more future periods and so will not be recognized as an inflow of resources (revenue) until that time. j. Advertising Costs Advertising costs are expensed as incurred. 5,185,137. During the year, component unit advertising costs totaled k. Compensated Absences Employees may carry over 240 hours of personal time off, and may sell back up to 80 hours annually on his/her anniversary date. However, at least 40 hours must remain in the employee's account after any hours are sold. Payment for excess time will first be applied to employee debts. The accrued compensation as of September 30, 2016 is 647,506. Upon termination, an employee is paid for all unused time. 24

30 NOTES TO THE FINANCIAL STATEMEN TS FOR THE YEAR ENDED SEPTEMBER 30, 2016 I. Cash Flow Statement The cash flow statement combines cash received from customers and cash paid for services with interfund payments. It is the Tribe's position that the cost of separating these payments outweighs the benefit. Note L, Related Party Transactions, reflects some interfund activity. 4. Change in Accounting Policies In fiscal year 2016, the Tribe adopted new statements of financial accounting standards issued by the Governmental Accounting Standards Board (GASB): -- Statement No. 72, Fair Value Measurement and Application -- Statement No. 73, Amends GASB 67 and Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Government -- Statement No. 79, Certain External Investment Pools and Pool Participants a. Statement No. 72 requires state and local governments to measure investments at fair value using a consistent definition and valuation techniques; also defines what assets and liabilities governments should measure at fair value and expands fair value disclosures in financial disclosure notes. While the Statement generally requires restatement of prior period balances in the year of implementation, the nature of the Tribe's investments was such that their carrying amount was not affected. b. Statement No. 73 clarifies the application of certain provisions of Statements 67 and 68. c. The GAAP hierarchy prioritizes guidance governments follow when preparing U.S. GAAP financial statements. Statement No. 76 reduces authoritative GAAP hierarchy from four categories to two and lists the order of priority for pronouncements to which a government should look for guidance. d. Statement No. 79 establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. B. Compliance and Accountability 1. Finance-Related Legal and Contractual Provisions In accordance with GASS Statement No. 38, "Certain Financial Statement Note Disclosures," violations of financerelated legal and contractual provisions, if any, are reported below, along with actions taken to address such violations: Violation None reported Action Ta ken Not applicable 2. Deficit Fund Balance or Fund Net Position of Individual Funds Following are funds having deficit fund balances or fund net position at year end, if any, along with remarks which address such deficits: Fund Name Component Unit-Downstream Dev Auth C. Deposits and Investments Deficit Amount (73,951,967) Remarks Expansion The Tribe's funds are deposited and invested with various depository institutions. The depository bank deposits for safekeeping and trust with the Tribe's agent bank approved pledged securities in an amount sufficient to protect Tribe funds on a day-to-day basis. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation ("FDIC") insurance. 25